CBOT corn outlook: Seen up as heat fuels crop concerns

U.S. corn futures are expected to start stronger Wednesday as meteorologists warn above-normal temperatures will keep crops under stress next week.

Traders predict corn for December delivery, the most actively traded contract, will start 4 cents to 6 cents a bushel higher at the Chicago Board of Trade. In overnight electronic trading, the contract rose 5 3/4 cents, or 0.8%, to $6.93 a bushel.

Extreme heat across the Midwest and southern U.S. is supporting prices as traders worry it will reduce the size of next fall's harvest. Farmers need favorable conditions to grow a large crop to replenish low inventories.

Yet, temperatures will soar well into the 90s across Wednesday and Thursday as a heat wave continues, according to meteorologists at private weather firm Freese-Notis Weather. Temperatures will return to above-normal levels next week after a temporary cool-down Monday and Tuesday, they predicted.

"The areas that do not get much rain through the end of the weekend will continue to be under considerable stress through the end of this month," they said.

Traders are paying close attention to weather conditions because inventories are expected to drop to a 15-year low this year and tighten further next year. Corn reached an all-time high last month on supply concerns and have since pulled back about 12%.

Unfavorable weather is worrisome as the crop is entering a key period of development called pollination. Some analysts have reduced their yield projections because of stressful weather, which started with excessive rains that delayed planting in the spring.

Crop condition ratings are expected to decline in a weekly U.S. government report Monday because of this week's extreme heat. The U.S. Department of Agriculture already cut its good-to-excellent rating for the crop by three percentage points this week because of hot, dry weather.

"With a lack of rainfall predicted for the rest of this week across the growing region and extreme heat putting pressure on the pollinating corn, crop conditions have a high probability of declining more this week than they did last week," said Carl Norden, analyst for Country Hedging, a brokerage firm in Minnesota.

In other news, the USDA said 138,000 metric tons of U.S. corn will be heading to South Korea for delivery before September. The government had previously reported the grain had been sold to "unknown destinations."